BILL NUMBER: SB 2046	CHAPTERED  09/29/00

	CHAPTER   852
	FILED WITH SECRETARY OF STATE   SEPTEMBER 29, 2000
	APPROVED BY GOVERNOR   SEPTEMBER 28, 2000
	PASSED THE SENATE   AUGUST 31, 2000
	PASSED THE ASSEMBLY   AUGUST 28, 2000
	AMENDED IN ASSEMBLY   AUGUST 18, 2000
	AMENDED IN ASSEMBLY   JULY 6, 2000
	AMENDED IN ASSEMBLY   JUNE 20, 2000
	AMENDED IN SENATE   MAY 2, 2000
	AMENDED IN SENATE   APRIL 24, 2000
	AMENDED IN SENATE   APRIL 13, 2000

INTRODUCED BY   Senator Speier

                        FEBRUARY 25, 2000

   An act to amend Section 1367.21 of the Health and Safety Code, to
amend Section 10123.195 of the Insurance Code, and to amend Section
14105.26 of the Welfare and Institutions Code, relating to health
care.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 2046, Speier.  Health care:  prescription drug coverage.
   (1) Existing law provides for the regulation and licensing of
health care service plans by the Department of Managed Care.  A
willful violation of the provisions governing health care service
plans is a crime.  Existing law provides for the regulation of
policies of disability insurance by the Insurance Commissioner.
   Existing law prohibits a health care service plan contract, and
specified disability insurance policies, from limiting or excluding
coverage for a drug on the basis that the drug is prescribed for a
use different than the use for which the drug has been approved for
marketing by the federal Food and Drug Administration (off-label use)
if specified conditions are met, including that the drug prescribed
is for the treatment of a life-threatening condition.
   This bill would modify that specific condition by also including a
drug that is prescribed for a chronic and seriously debilitating
condition.  This bill would define "chronic and seriously
debilitating."  The bill would require the drug be medically
necessary for the chronic and seriously debilitating condition.
   The bill would require, for health care service plans, that if the
drug for a life-threatening or chronic and seriously debilitating
condition is not on the plan's formulary, that the procedures
relating to the use of nonformulary prescription drugs instead be
followed.  The bill would specify that the requirement for coverage
for off-label drug use not be construed to prohibit the use of
specified mechanisms as a means of appropriately controlling the
utilization of the off-label use of prescription drugs for
life-threatening and chronic and seriously debilitating conditions.
The bill would permit a plan subscriber or insured to use the
Independent Medical Review System to review a denial of coverage by
either a health care service plan or a disability insurer of a
request for the off-label use of a prescription drug for treating a
life-threatening or chronic and seriously debilitating condition when
the basis for the denial is that the use of the drug is experimental
or investigational.
   Because a violation of this bill's requirements with respect to
coverage under a health care service plan contract would be a crime,
this bill would impose a state-mandated local program by creating a
new crime.
   (2) Existing law provides for the Medi-Cal program, administered
by the State Department of Health Services, under which qualified
low-income persons are provided with health care services.
   The Medi-Cal program provides for a special methodology of
reimbursement of disproportionate share hospitals for the provision
of inpatient hospital services, and provides for the supplemental
reimbursement of eligible disproportionate share providers for
funding capital projects.
   Existing law further authorizes a distinct part of an acute care
hospital providing specified services and meeting certain
requirements to receive, in addition to the rate of payment that the
facility would otherwise receive for skilled nursing services,
supplemental reimbursement for capital projects under specified
conditions.  One of those conditions is that for a new capital
project to be eligible for the supplemental reimbursement, the final
plans for the project must have been submitted to the appropriate
review agency before July 1, 2001.
   This bill would extend the time for submission of the final plans
to the appropriate review agency until January 1, 2003.
  (3) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state.  Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 1367.21 of the Health and Safety Code is
amended to read:
   1367.21.  (a) No health care service plan contract which covers
prescription drug benefits shall be issued, amended, delivered, or
renewed in this state if the plan limits or excludes coverage for a
drug on the basis that the drug is prescribed for a use that is
different from the use for which that drug has been approved for
marketing by the federal Food and Drug Administration (FDA), provided
that all of the following conditions have been met:
   (1) The drug is approved by the FDA.
   (2) (A) The drug is prescribed by a participating licensed health
care professional for the treatment of a life-threatening condition;
or
   (B) The drug is prescribed by a participating licensed health care
professional for the treatment of a chronic and seriously
debilitating condition, the drug is medically necessary to treat that
condition, and the drug is on the plan formulary.  If the drug is
not on the plan formulary, the participating subscriber's request
shall be considered pursuant to the process required by Section
1367.24.
   (3) The drug has been recognized for treatment of that condition
by one of the following:
   (A) The American Medical Association Drug Evaluations.
   (B) The American Hospital Formulary Service Drug Information.
   (C) The United States Pharmacopoeia Dispensing Information, Volume
1, "Drug Information for the Health Care Professional."
   (D) Two articles from major peer reviewed medical journals that
present data supporting the proposed off-label use or uses as
generally safe and effective unless there is clear and convincing
contradictory evidence presented in a major peer reviewed medical
journal.
   (b) It shall be the responsibility of the participating prescriber
to submit to the plan documentation supporting compliance with the
requirements of subdivision (a), if requested by the plan.
   (c) Any coverage required by this section shall also include
medically necessary services associated with the administration of a
drug, subject to the conditions of the contract.
   (d) For purposes of this section, "life-threatening" means either
or both of the following:
   (1) Diseases or conditions where the likelihood of death is high
unless the course of the disease is interrupted.
   (2) Diseases or conditions with potentially fatal outcomes, where
the end point of clinical intervention is survival.
   (e) For purposes of this section, "chronic and seriously
debilitating" means diseases or conditions that require ongoing
treatment to maintain remission or prevent deterioration and cause
significant long-term morbidity.
   (f) The provision of drugs and services when required by this
section shall not, in itself, give rise to liability on the part of
the plan.
   (g) Nothing in this section shall be construed to prohibit the use
of a formulary, copayment, technology assessment panel, or similar
mechanism as a means for appropriately controlling the utilization of
a drug that is prescribed for a use that is different from the use
for which that drug has been approved for marketing by the FDA.
   (h) If a plan denies coverage pursuant to this section on the
basis that its use is experimental or investigational, that decision
is subject to review under Section 1370.4.
   (i) Health care service plan contracts for the delivery of
Medi-Cal services under the Waxman-Duffy Prepaid Health Plan Act
(Chapter 8 (commencing with Section 14200) of Part 3 of Division 9 of
the Welfare and Institutions Code) are exempt from the requirements
of this section.
  SEC. 2.  Section 10123.195 of the Insurance Code is amended to
read:
   10123.195.  (a) No group or individual disability insurance policy
issued, delivered, or renewed in this state or certificate of group
disability insurance issued, delivered, or renewed in this state
pursuant to a master group policy issued, delivered, or renewed in
another state that, as a provision of hospital, medical, or surgical
services, directly or indirectly covers prescription drugs shall
limit or exclude coverage for a drug on the basis that the drug is
prescribed for a use that is different from the use for which that
drug has been approved for marketing by the federal Food and Drug
Administration (FDA), provided that all of the following conditions
have been met:
   (1) The drug is approved by the FDA.
   (2) (A) The drug is prescribed by a contracting licensed health
care professional for the treatment of a life-threatening condition;
or
   (B) The drug is prescribed by a contracting licensed health care
professional for the treatment of a chronic and seriously
debilitating condition, the drug is medically necessary to treat that
condition, and the drug is on the insurer's formulary, if any.
   (3) The drug has been recognized for treatment of that condition
by one of the following:
   (A) The American Medical Association Drug Evaluations.
   (B) The American Hospital Formulary Service Drug Information.
   (C) The United States Pharmacopoeia Dispensing Information, Volume
1, "Drug Information for the Health Care Professional."
   (D) Two articles from major peer reviewed medical journals that
present data supporting the proposed off-label use or uses as
generally safe and effective unless there is clear and convincing
contradictory evidence presented in a major peer reviewed medical
journal.
   (b) It shall be the responsibility of the contracting prescriber
to submit to the insurer documentation supporting compliance with the
requirements of subdivision (a), if requested by the insurer.
   (c) Any coverage required by this section shall also include
medically necessary services associated with the administration of a
drug subject to the conditions of the contract.
   (d) For purposes of this section, "life-threatening" means either
or both of the following:
   (1) Diseases or conditions where the likelihood of death is high
unless the course of the disease is interrupted.
   (2) Diseases or conditions with potentially fatal outcomes, where
the end point of clinical intervention is survival.
   (e) For purposes of this section, "chronic and seriously
debilitating" means diseases or conditions that require ongoing
treatment to maintain remission or prevent deterioration and cause
significant long-term morbidity.
   (f) The provision of drugs and services when required by this
section shall not, in itself, give rise to liability on the part of
the insurer.
   (g) This section shall not apply to a policy of disability
insurance that covers hospital, medical, or surgical expenses which
is issued outside of California to an employer whose principal place
of business is located outside of California.
   (h) Nothing in this section shall be construed to prohibit the use
of a formulary, copayment, technology assessment panel, or similar
mechanism as a means for appropriately controlling the utilization of
a drug that is prescribed for a use that is different from the use
for which that drug has been approved for marketing by the FDA.
   (i) If an insurer denies coverage pursuant to this section on the
basis that its use is experimental or investigational, that decision
is subject to review under the Independent Medical Review System of
Article 3.5 (commencing with Section 10169).
   (j) This section is not applicable to vision-only, dental-only,
Medicare or Champus supplement, disability income, long-term care,
accident-only, specified disease or hospital confinement indemnity
insurance.
  SEC. 3.  Section 14105.26 of the Welfare and Institutions Code is
amended to read:
   14105.26.  (a) Each eligible facility, as described in paragraph 2
of subdivision (b), may, in addition to the rate of payment that the
facility would otherwise receive for skilled nursing services,
receive supplemental Medi-Cal reimbursement to the extent provided in
this section.
   (b) (1) Projects eligible for supplemental reimbursement shall
include any new capital projects for which final plans have been
submitted to the appropriate review agency after January 1, 2000, and
before January 1, 2003.  For purposes of this section, "capital
project" means the construction, expansion, replacement, remodeling,
or renovation of an eligible facility, including buildings and fixed
equipment.  A "capital project" does not include the provision of
furnishings or of equipment that is not fixed equipment.
   (2) A facility shall be eligible only if the submitting entity had
all of the following additional characteristics during the 1998
calendar year:
   (A) Provided services to Medi-Cal beneficiaries.
   (B) Was a distinct part of an acute care hospital providing
skilled nursing care and supportive care to patients whose primary
need is for the availability of skilled nursing care on an extended
basis.  For the purposes of this section, "acute care hospital" means
the facilities defined in subdivisions (a) or (b), or both, of
Section 1250 of the Health and Safety Code.
   (C) Had not less than 300 licensed skilled nursing beds.
   (D) Had an average skilled nursing Medi-Cal patient census of not
less than 80 percent of the total skilled nursing patient days.
   (E) Was owned by a county or city and county.
   (c) (1) An eligible facility seeking to qualify for supplemental
reimbursement shall submit documentation to the department regarding
debt service on revenue bonds or other financing instruments used for
financing the capital project.
   (2) The department shall confirm in writing project eligibility
under this section.
   (d) (1) Capital projects receiving funding shall include only the
upgrading or construction of buildings and equipment to a level
required by currently accepted medical practice standards, including
projects designed to correct Joint Commission on Accreditation of
Hospitals and Health Systems, fire and life safety, seismic, or other
related regulatory standards.
   (2) Capital projects receiving funding may expand service capacity
as needed to maintain current or reasonably foreseeable necessary
bed capacity to meet the needs of Medi-Cal beneficiaries after giving
consideration to bed capacity needed for other patients, including
unsponsored patients.
   (3) Supplemental reimbursement shall only be made for capital
projects, or for that portion of capital projects that provide
skilled nursing services, and that are available and accessible to
patients eligible for services under this chapter.
   (e) An eligible facility's supplemental reimbursement for a
capital project qualifying pursuant to this section shall be
calculated and paid as follows:
   (1) For any fiscal year for which the facility is eligible to
receive supplemental reimbursement, the facility shall report to the
department the amount of debt service on the revenue bonds or other
financing instruments issued to finance the capital project.
   (2) For each fiscal year in which an eligible facility requests
reimbursement, the department shall establish the ratio of skilled
nursing Medi-Cal days of care provided by the eligible facility to
total skilled nursing patient days of care provided by the eligible
facility.  The ratio shall be established using data obtained from
audits performed by the department, and shall be applied to the
corresponding fiscal year of debt service on the revenue bonds or
other financing instruments issued to finance the capital project.
   (3) The amount of debt service that will be submitted to the
federal Health Care Financing Administration for the purpose of
claiming reimbursement for each fiscal year shall equal the amount
determined annually in paragraph (1) multiplied by the percentage
figure determined in paragraph (2).
   (4) The supplemental reimbursement to an eligible facility shall
be equal to the amount of federal financial participation received as
a result of the claims submitted pursuant to paragraph (2) of
subdivision (j).
   (5) In no instance shall the total amount of supplemental
reimbursement received under this section combined with that received
from all other sources dedicated exclusively to debt service exceed
100 percent of the debt service for the capital project over the life
of the loan, revenue bond, or other financing mechanism.
   (6) A facility qualifying for and receiving supplemental
reimbursement pursuant to this section shall continue to receive
reimbursement until the qualifying loan, revenue bond, or other
financing mechanism is paid off, and as long as the facility meets
the requirements of paragraph (3) of subdivision (d).
   (7) The supplemental Medi-Cal reimbursement provided by this
section shall be distributed under a payment methodology based on
skilled nursing services provided to Medi-Cal patients at the
eligible facility, either on a per diem basis, a per discharge basis,
or any other federally permissible basis.  The department shall seek
approval from the federal Health Care Financing Administration for
the payment methodology to be utilized, and shall not make any
payment pursuant to this section prior to obtaining that approval.
   (8) The supplemental reimbursement provided by this section shall
not commence prior to the date upon which the hospital submits to the
department a copy of the certificate of occupancy for the capital
project.
   (f) (1) It is the Legislature's intent in enacting this section to
provide a funding source for a portion of the construction costs of
eligible facilities without any expenditure from the state General
Fund.
   (2) The state share of the amount of the debt service submitted to
the federal Health Care Financing Administration for purposes of
supplemental reimbursement shall be paid with county-only funds and
certified to the state as provided in subdivision (g).  Any amount of
the costs of the capital project that are not reimbursed by federal
funds shall be borne solely by the eligible facility.
   (3) Prior to receiving any funding through this section, an
eligible facility shall demonstrate its ability to cover all of the
anticipated costs of construction, including those not reimbursed
through federal funding.
   (g) The county or city and county, on behalf of any eligible
facility, shall do all of the following:
   (1) Certify, in conformity with the requirements of Section 433.51
of Title 42 of the Code of Federal Regulations, that the claimed
expenditures for the capital project are eligible for federal
financial participation.
   (2) Provide evidence supporting the certification as specified by
the department.
   (3) Submit data, as specified by the department, to determine the
appropriate amounts to claim as expenditures qualifying for financial
participation.
   (4) Keep, maintain, and have readily retrievable, such records as
specified by the department in order to fully disclose reimbursement
amounts to which the eligible facility is entitled, and any other
records required by the federal Health Care Financing Administration.

   (h) The department may require that any county or city and county
seeking supplemental reimbursement under this section enter into an
interagency agreement with the department for the purpose of
implementing this section.
   (i) All payments received by an eligible facility pursuant to this
section shall be placed in a special account, the funds of which
shall be used exclusively for the payment of expenses related to the
eligible capital project.
   (j) (1) The department shall promptly seek any necessary federal
approvals for the implementation of this section.  If necessary to
obtain federal approval, the department may, for federal purposes,
limit the program to those costs that are allowable expenditures
under Title XIX of the federal Social Security Act (Subchapter 19
(commencing with Section 1396) of Chapter 7 of Title 42 of the United
States Code).  If federal approval is not obtained for
implementation of this section, this section shall become
inoperative.
   (2) The department shall submit claims for federal financial
participation for the expenditures for debt service that are
allowable expenditures under federal law.
   (3) The department shall, on an annual basis, submit any necessary
materials to the federal government to provide assurances that
claims for federal financial participation will include only those
expenditures that are allowable under federal law.
   (k) Supplemental reimbursement paid under this section shall not
duplicate any reimbursement received by an eligible facility pursuant
to this chapter for construction costs that would otherwise be
eligible for reimbursement under this section.  In no event shall the
total Medi-Cal reimbursement pursuant to this chapter to a facility
eligible under this section be less than what would have been paid
had this section not existed.
   (l) In the event there is a final judicial determination by any
court of appellate jurisdiction or a final determination by the
administrator of the federal Health Care Financing Administration
that the supplemental reimbursement provided in this section must be
made to any facility not described therein, this section shall become
immediately inoperative.
   (m) Any and all funds expended pursuant to this section shall be
subject to review and audit by the department.
  SEC. 4.  No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition of a crime within the meaning of
Section 6 of Article XIIIB of the California Constitution.
